"What is my insurance agency worth?"

That is the question that every agency principal asks at some point in their career.? There are many sources and people that you can turn to for an opinion. ?If you want to know the right answer though, follow these rules:

1)??Don’t pay attention to industry articles and online valuation tools.?

They are inaccurate and misleading.?I’ve seen articles quoting guaranteed multiples of “12-13 x EBITDA” and certain types of agencies commanding “20+ x EBITDA”.?I’ve seen online valuation tools that spit out a value of 1.5 x revenue based on two data points.?It’s all noise.?The market is always changing.?No two agencies are exactly the same.?No two deals are exactly the same.?Find someone to help you evaluate YOUR agency in today's market.???

2)??Don’t listen to buyers or peers.

They are biased, self-interested, and have limited knowledge.?If I have a medical issue and go to a surgeon for advice, I know he will advocate surgery – its what he knows and in his own interests.?In the same way, a peer or a buyer is going to tell you what they know, which is limited, and the answer will be in their self-interests – either to get you to sell to them or to get a finder’s fee by introducing you to a buyer.??

3)??Don’t pay for a valuation or pay an engagement retainer.?

People that charge you to tell you what your business is worth are making a living doing something other than M&A, which means that they don’t know the market value.?If they charge you a fee upfront to take the business to market, it’s because they don’t have confidence that they can deliver on whatever sale price they’re telling you.?The only time to pay for a valuation is if you need it for the IRS, a court, or a lender.??

4)??Do work with someone that has sold a lot of businesses like yours.?

People that actively sell businesses like yours not only know what it’s worth, how to increase the value, and the ideal buyers for it, but also what needs to be addressed in your business to get through a sale process. ?You can have a business worth “X” on paper and not be able to sell for that much due to hidden issues that aren't a problem for you but are for buyers. The only person that knows where deals go sideways is the one that manages deals regularly.

The world is full of opinions... the key to getting the right answer lies in knowing where to find it.? And having it is worth a lot of money when dealing with the value of your business.?